Salvation for Monks as performance prayers answered

Through the six months to 31 October, Monks returned 9.4% on a net asset basis compared with 6% from the FTSE World index.

In the prior year to 30 April 2013 the trust had generated 7.8%, considerably below its benchmark’s 21.4% for the equivalent period. This meant that over the five years to that date, Monks returned 11.2% compared with 42.6% from the index.

Monks is now ahead of the FTSE World index on a five-year view, with a return of 99% to 94.8%, thanks to the turnaround since April and the fact that the period no longer includes its 2008 nadir, when its peak-to-trough loss was 50%.

Baillie Gifford appointed Tom Walsh (pictured) as the fund’s deputy manager in January, to work alongside its veteran chief investment officer Gerald Smith, and the Monks portfolio has quickly been overhauled.

Most prominently the trust’s exposure to emerging markets has been slashed from 20.4% last year to 10.9% today, and to bonds from 5.5% to 4.3%. Walsh also sold the portfolio’s gold holdings at the start of the year.

In their place, Monks has refocused on quality growth names. The managers highlighted Sky Deutschland, Facebook and TripAdvisor as key contributors over the past six months.

‘A common factor among many of our more successful investments during this period is that their value is derived almost entirely from anticipated future earnings rather than today’s cash flows,’ explained Smith and Walsh.

‘Until recently these types of companies have been shunned by many investors in favour of those perceived as more defensive, especially when accompanied by relatively high dividends. This period has seen something of a reversal of the previous trend.’

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